Does investment inspire better governance? Using a global sample of 3,944 sustainable bonds, issued by public firms from 2013 to 2022, the causal generalised method of moments (GMM) estimates suggest that 1% increase in sustainable debt to total debt ratio improves the sustainable governance practices by 9%. To address potential simultaneity bias, we employ a method that utilizes the heteroskedasticity of structural shocks. Our findings also confirm that the standard panel regressions, even with fixed effects, may exaggerate effects due to simultaneity. Our findings remain consistent across different measures of sustainable governance using different databases and battery of other checks.
